Augusto Palisoc Jr., the president and chief executive of Metro Pacific Hospital Holdings Inc., firmly believes that doctors should not be bothered by worries on the “management” side of the healthcare business.
“In the past and even up to now, some hospitals require that doctors invest in shares of the hospital in order to be able to practice,” said the chief of Metro Pacific Investment Corp.’s holding company for healthcare investments.
“We believe that money should not be a requirement for a doctor to practice in any hospital, because it deprives our customers from being treated by many young and good doctors who may not have the funds to invest in shares,” he said.
“Doctors and medical staff in the MPIC hospital group are assured of working with adequate equipment, modern technology, and a professional management atmosphere, where they can focus on curing and attending to our patients,” he told Manila Standard.
Indirectly, Palisoc claimed this management template has provided Filipino nurses, pharmacists, physical therapists, medical technologists and other medical professionals with a greater reason to stay and work in the Philippine heath sector.
“Dozens of young managers and nursing staff have decided to stay in the country, despite calls from foreign employers because of the career growth and brighter future they see with us now,” he said. “This is because they have found greater motivation to give the very best of themselves here, where they can remain close to their families.”
Sunrise industry
Interestingly, the Philippines’ health sector, more than a decade ago, seemed hardly a candidate as a future sunrise industry.
Various private family-owned hospitals, as well as government-run medical facilities were in bad financial straits, and many did not seem to be in a position to modernize their operations, nor spend precious capital expenditures on cutting-edge heathcare for their patients.
Things changed in 2007, when Palisoc, then an executive of MPIC, was approached by chairman Manuel Pangilinan, and asked: Should he (Pangilinan) accept a directorship at the Makati Medical Center? The hospital was then in dire financial difficulties, and on the brink of bankruptcy.
Palisoc recalled his reply: “If you accept the directorship, I am sure they will next ask for money to help save them, and I don’t think we should invest. It’s going down fast, we don’t know anything about the hospital business, and I seriously doubt if that hospital is savable, so I think you should decline”.
MVP, known to relish challenges, did the exact opposite. He also promptly put Palisoc in charge of the hospital group.
It so happened, the silver-haired Palisoc misread the health industry’s overall potential. The sector has now emerged as the new sunrise industry, just like the business process outsourcing companies when they began to redefine information technology during the early part of the new millennium.
Growth and investment activity has marked the sector as the government proceeds with its goal of providing universal healthcare to the population. Today, both the public and the private health sectors, are modifying their systems and forward planning accordingly in order to align with governmental, regulatory and societal shifts.
Nowhere is this growth more apparent than in the surge of mergers, alliances and acquisitions over the past several years which has encouraged investors to participate in a growing pillar of Philippine economic growth, the health industry.
The multi-million-peso infusion by the private sector in terms of joint ventures with public hospitals, as well as capex investments in greenfield projects and modern medical facilities, have meant crucial support for the Duterte government’s ‘Build, Build, Build’ program.
Dubbed “Dutertenomics”, the mantra of Digong”s economic managers seeks to construct modern bridges and roads, mega subway systems, and world-class airports and seaports in the country the next 10 years.
Hefty capex
A notable example is MPIC’s Hospital Holdings which plans to spend P10 billion to P12 billion in capex to fund expansion plans in the next five years.
MPIC was the first company to believe in the bottom line potential of the healthcare sector when it began acquiring hospitals in Metro Manila and the rest of the country. The conglomerate’s hospital group is actively on the lookout for more investments in the healthcare sector after getting GIC, Singapore’s sovereign wealth fund through its private equity arm, as a strategic partner for the hospital business.
Currently, it has acquired as many as 14 hospitals to achieve its goal of hitting 5,000 beds. The company last year said it would invest in 10 to 15 hospitals to add around 2,000 more beds and expand existing medical facilities by another 700 to 800 beds to increase its presence in the sector across the country.
MPIC’s hospital portfolio include St. Elizabeth Hospital in General Santos City, West Metro Medical Center in Zamboanga City, Davao Doctors Hospital, Makati Medical Center, Asian Hospital & Medical Center, Cardinal Santos Medical Center, Manila Doctors Hospital, Our Lady of Lourdes Hospital, De Los Santos Medical Center, Marikina Valley Medical Center, Jesus Delgado Memorial Hospital,, Riverside Medical Center in Bacolod, Central Luzon Doctors Hospital in Tarlac and Sacred Heart Hospital in Malolos, Bulacan.
‘Challenging ourselves’
Palisoc said his team decided to “challenge” themselves after turning Makati Med around more than a decade ago. “We asked: if there were hospital chains in other countries, perhaps we can also do the same in our own homeland. So started our quest to build the first nationwide chain of hospitals,” he said.
“In Mindanao, we offered ourselves as a solution to shareholder groups that could not see eye-to-eye for many years, which is detrimental to any hospital or company, for that matter,” he recalled. “We offered ourselves as a solution, by acquiring the shares of one group and working well with the remaining group, resulting in the improvements and the face-lifting of Davao Doctors Hospital.
The same strategy worked with a religious organization that owned Cardinal Santos Medical Center. It was looking for a new operator, and selected the MPIC hospital group in in 2009. “We immediately built a new parking building, added equipment and improved processes,” Palisoc said. “We built the first Philippine Center for Advanced Surgery in this hospital, which would allow Filipino doctors to not need to go abroad to train for minimally invasive surgery. Incidentally, our Lessor now enjoys much higher rental ncome, enabling them to better fulfill their own missions and religious advocacies.”
In the Visayas, a family decided to sell a majority stake to the hospital group, and retire from the day-to-day management of their hospital. The hospital group acquired their shares and installed a professional CEO. “Most of the family is now enjoying retirement, while we are now constructing a new building that will expand the capacity of Riverside Medical Center to better service its community in the island of Negros,” Palisoc said.
In Sta. Mesa, a hospital owned by the Sisters of the Holy Spirit was losing money because of unrealistic labor costs and union issues. Palisoc said his team came in upon their request, to operate the hospital under a new company, hired employees at the correct salary scale and professionalized operations. “The Our Lady of Lourdes Hospital has returned to profitability and is now a sustainable business that has up to date equipment, facilities and practices,” he said.
“Last year, they launched a newly renovated pediatric floor now being enjoyed by many children and their parents, both for private and charity patients; as well as an Outpatient pharmacy that guarantees low cost and high quality medicines,” he said.
Lesson learned
Palisoc said his team’s experience with turning Makati Med and other ailing medical facilities around afforded them key lessons about the heath care business.
“Hospitals could also be a good business, if managed well,” he said. “Even if profit margins are not that high, it is a rather stable business.”
Palisoc said they learned that the country has many good, talented doctors, and medical professionals. “They just need a well-managed, well-equipped hospital to practice in,”
A less obvious observation, Palisoc said, which soon came to light, was that “most hospital owners and managers were trained in medicine, but not quite in management.”
Perhaps the most profitable piece of wisdom the group culled is that “aside from opportunities to improve individual hospital operations, there could be more significant benefits from synergies if we could organize a group of hospitals.”
Finally, Palisoc offered a truism which he fervently believes in to this day: “a professionally-run hospital group could really make a contribution to improving the quality of life of our fellow Filipinos,” he said.
Helping communities where health care is a problem
Palisoc claimed that in less than a decade, the Metro Pacific Hospital Group has become the largest private hospital group in the country comprising 14 premiere hospitals, three primary care clinics, two healthcare colleges, and 1 cancer center, with a total in-patient capacity of almost 3,300 beds, a pool of 7,600 doctors, 6,600 nurses, and 10,500 employees, all focused on serving approximately 2,700,000 patients a year.
He said all the group’s hospitals not only fulfill statutory requirements for charity beds for indigent patients, but take their corporate social responsibility seriously.
“Through our various hospital companies, or their respective foundations, we support charity and continuous medical missions and pastoral activities, helping the underserved and marginalized in the communities where we operate,” he said.
“One of our hospital foundations has embarked on an initiative to share with government hospitals how our private hospitals are managed, like the proverbial ‘teaching men to fish, instead of just giving them fish each day’,” he said.
The first beneficiary of this initiative is the 300-bed Rizal Medical Center in Pasig, followed by the 800-bed AFP Medical Center in V. Luna Quezon City, he said.
Best practices
Palisoc revealed that one of the group’s synergies is group purchasing.
“Instead of each hospital negotiating individually with suppliers, we have organized our purchasing activities as a group, which is more efficient not only for each hospital, but also for the various suppliers dealing with us,” he explained. “The savings enable us to invest more in our hospitals, and, most importantly, lower prices for our customers.”
The group plans to further strengthen its medical portfolio through the acquisition of up to four hospitals a year. It is enhancing its business model through new healthcare delivery platforms like mall-based clinics and telehealth.
Palisoc said the company will continue to talk to hospital owners all over the country “to see where our next investments should go."